KYODO PAPER HOLDINGS FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥8.08B
• Operating Income: ¥-29M
• Net Income: ¥7M
• EPS: ¥-12.01

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Kyodo Shihan Holdings (9849) posted FY2026 Q2 consolidated revenue of ¥8,082m, a slight decline of 0.5% YoY, underscoring a largely flat top line in a mature, price-competitive paper distribution market. Gross profit was ¥974.2m, implying a gross margin of 12.1%, which is thin but broadly in line with sector characteristics. Operating income was a small loss of ¥29m (operating margin of approximately -0.36%), essentially flat YoY, indicating that modest top-line pressure and cost structure rigidity continue to keep operating results around breakeven. Ordinary loss narrowed to ¥11m, suggesting small positive non-operating gains or reduced non-operating costs relative to operating results. Net loss was ¥8m (EPS -¥12.01), with reported YoY change of -87.4%, highlighting earnings volatility at very low profit levels. The DuPont breakdown yields an ROE of -0.21% driven by a very thin net profit margin (-0.10%), moderate asset turnover (0.874x), and financial leverage of 2.37x, indicating that leverage is not high enough to offset margin weakness. SG&A is inferred at roughly ¥1,003m (gross profit minus operating income), equating to about 12.4% of sales, which slightly exceeds gross margin and explains the operating loss; a small improvement in gross margin or SG&A ratio would tip results into profit. Liquidity appears adequate with a current ratio of 127.9% and positive working capital of ¥1,478.7m, helping cushion near-term obligations. Capital structure is moderate with total liabilities of ¥5,622m against equity of ¥3,900m (D/E ~1.44x), consistent with a trading-oriented balance sheet. Asset turnover of 0.874x suggests reasonable utilization for a wholesaler, though there may be room for efficiency gains. Income tax expense of ¥20.7m despite a net loss likely reflects non-income taxes and adjustments common under JGAAP, including local taxes and permanent differences. Cash flow statement items are unreported in this dataset, constraining assessment of earnings-to-cash conversion and free cash flow durability. Dividends are shown as zero, which aligns with a conservative stance while profitability remains fragile. Overall, the quarter reflects resilient revenue but ongoing margin pressure and limited operating leverage, with balance sheet liquidity and moderate leverage providing stability. Near-term performance hinges on gross margin management (pricing/pass-through) and SG&A control, given how close the company is to breakeven. Data gaps in cash flows and inventories limit deeper diagnostic on working capital turns and cash generation.

Profitability Analysis

ROE_decomposition: ROE of -0.21% = Net margin (-0.10%) × Asset turnover (0.874x) × Financial leverage (2.37x). The negative ROE is principally driven by a very slim net loss margin, while turnover and leverage are within normal trading company ranges. margin_quality: Gross margin is 12.1% (¥974.2m/¥8,082m), consistent with paper wholesale’s thin spread. Operating margin is approximately -0.36% (¥-29m/¥8,082m). SG&A is inferred at ~¥1,003m (≈12.4% of sales), slightly above gross margin, leading to the operating loss. Ordinary loss (¥-11m) is narrower than operating loss, implying small net non-operating gains or reduced non-operating costs. Net margin is -0.10%. Income taxes were ¥20.7m despite a loss, consistent with local taxes/minimum taxes and permanent differences under JGAAP. operating_leverage: With gross margin only marginally below SG&A ratio, small changes in pricing or cost absorption have an outsized effect on operating income. The near-breakeven profile indicates high sensitivity to gross profit per ton and SG&A efficiency; a ±20 bps change in either could swing to profit/loss.

Growth Assessment

revenue_sustainability: Revenue declined modestly by 0.5% YoY to ¥8,082m, suggesting stable volume/value despite structural headwinds in print media and office paper. Sustainability depends on price pass-through in response to input cost moves and maintaining share with printers and commercial users. profit_quality: Profitability remains fragile with an operating loss of ¥29m and net loss of ¥8m. Gross margin at 12.1% provides limited buffer against SG&A. Ordinary loss is narrower than operating loss, hinting at recurring non-operating support (e.g., dividends/interest income), but this is not a substitute for core profit. outlook: Absent a recovery in gross spread or SG&A reductions, earnings will hover around breakeven. Key drivers near term include supplier pricing, product mix (higher-margin specialty papers), and logistics cost normalization. Modest revenue stabilization combined with even slight SG&A discipline could restore positive operating income.

Financial Health

liquidity: Current assets ¥6,785.0m and current liabilities ¥5,306.3m yield a current ratio of 127.9%, with working capital of ¥1,478.7m. The quick ratio equals the current ratio in the dataset due to unreported inventories; actual quick liquidity may be lower depending on inventory levels. solvency: Total liabilities are ¥5,622.4m against equity of ¥3,900.0m, implying D/E of ~1.44x and financial leverage of 2.37x (assets/equity). This is moderate for a trading/distribution model and appears manageable given the positive working capital. capital_structure: Balance sheet is typical of a wholesaler: sizeable current assets and current liabilities. The reported equity ratio of 0.0% is not reflective of the stated equity and should be viewed as unreported rather than zero. No interest expense is disclosed in the dataset.

Cash Flow Quality

earnings_quality: Earnings quality cannot be validated due to unreported operating, investing, and financing cash flows. Given thin margins and a near-breakeven operating result, cash conversion will be highly sensitive to working capital swings. FCF_analysis: Free cash flow is unreported. With marginal profitability, sustainable FCF would depend on disciplined inventory and receivables management and controlled capex. working_capital: Working capital stands at ¥1,478.7m, providing a buffer. Inventories and cash balances are unreported, limiting assessment of inventory days and liquidity concentration in receivables vs. cash.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is shown as ¥0.00 with a payout ratio of 0.0%, consistent with a prudent approach while net income is negative. FCF_coverage: FCF coverage is unreported/0.00x in the dataset; without cash flow disclosure, we cannot confirm dividend capacity from free cash flow. policy_outlook: Given operating losses and slim margins, continuation of a conservative dividend stance appears plausible until profitability stabilizes. Any resumption or increase would likely follow sustained positive operating income and demonstrated cash generation.

Risk Assessment

Business Risks:

• Structural demand decline for graphic paper due to digitalization
• Input price volatility (pulp, energy) affecting procurement costs
• Ability to pass through supplier price changes to customers
• Customer concentration among printers/publishers and commercial users
• Logistics and distribution cost inflation impacting margins
• Product mix risk between commodity and specialty papers
• Competitive pricing pressure in a mature wholesale market

Financial Risks:

• Thin margins create high earnings sensitivity to small revenue or cost changes
• Working capital intensity exposes cash flows to receivable and inventory cycles
• Moderate leverage (D/E ~1.44x) increases exposure to downturns
• Tax expense despite accounting losses can depress after-tax earnings
• Limited visibility on cash flows due to unreported OCF/FCF in the period

Key Concerns:

• Operating loss at -¥29m with SG&A slightly above gross profit
• Net loss despite stable revenue highlights margin pressure
• Lack of disclosed cash flow and inventory data impedes cash conversion analysis

Investment Implications

Key Takeaways:

• Revenue essentially flat YoY (-0.5%) at ¥8,082m, indicating stable top line in a challenging market
• Gross margin of 12.1% is insufficient to cover SG&A (≈12.4% of sales), resulting in a small operating loss
• ROE of -0.21% driven by a marginal net loss margin; asset turnover and leverage are reasonable
• Liquidity is adequate with a 127.9% current ratio and ¥1.48bn working capital
• Capital structure moderate (D/E ~1.44x), supporting operations but leaving limited cushion if margins compress
• Ordinary loss narrower than operating loss suggests small non-operating support
• Tax expense present despite loss, dampening bottom line
• Data limitations on cash flows and inventories constrain FCF and working capital diagnostics

Metrics to Watch:

• Gross margin vs. SG&A ratio (basis-point movements around breakeven)
• Operating income/ordinary income trajectory and gap
• Asset turnover (revenue/total assets) and receivables/inventory turns when available
• Working capital levels and composition (AR, inventory, AP)
• Cash from operations and free cash flow once disclosed
• Debt levels and interest expense disclosure
• Pricing pass-through and product mix (specialty vs. commodity papers)

Relative Positioning: Within Japan’s paper distribution space, the company exhibits typical thin spreads and moderate leverage, but currently trails on profitability as it operates near breakeven; maintaining share and improving cost discipline are key to closing the gap with more profitable peers.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis